Market Direction Continues To Hang On

Market Direction continues to confound the experts as the market hangs on to the recent gains. To show just how much the market direction has hung in, on September 14 the S&P 500 closed at 1465.77, a new high for the past four years. Today the S&P 500 closed at 1456.89, a difference of just 8.88 points or 0.60%. So despite all the chit-chat among the media pundits, the S&P 500 has done an amazing job of holding onto its recent gains. The problem for the market though is, it just isn’t moving higher despite hanging on. The S&P 500 cannot stay stuck at this range much longer. Without a break to the upside, market direction will break to the downside.

Market Direction For Sept 24 2012

Today was another typical day for the S&P 500. When market direction turned lower in the morning, the dip buyers stepped in and bought stock. By the afternoon they had pushed the market back up to leave it with a very small loss. While this is admirable and shows investors are still interested in stocks, it also shows that there is a lack of conviction among buyers at the present level in all the indexes.

Market Direction Technical Outlook

The technical analysis of the market direction shows that there are still problems persisting. These problems could take the S&P 500 lower if the market direction does not pick up soon. Below are my market timing indicators for today, Monday September 24 2012.

Momentum throughout the past few days has remained positive despite the recent bout of weakness in the stock markets. Today the index is back rising again.

MACD is still positive but at 0.84 it won’t take much to turn this technical indicator bearish.

The Ultimate Oscillator is still positive and while the overbought condition is gone, the Ultimate Oscillator is rising which tells investors that despite the weakness there are buyers picking up stocks on dips.

Rate of Change is lower than yesterday but still quite positive.

The Slow Stochastic is signaling that the market direction up is still under pressure and since it predicts out more than a a couple of days, it would seem that the indicator is advising investors that stocks could be weak for much of this week.

The Fast Stochastic is confirming what the Slow Stochastic is advising. But the readings from both the Slow and Fast Stochastic indicators are not widely diverged. This means that stocks are under pressure, but a large fall is not predicted at this stage.

Market Direction Indicators

Market Direction Outlook For September 25 2012

The concern I have with the present market direction is that unless the market rises soon, it will pull back as the path of least resistance is always down.  A move lower could be deeper than expected if a mover lower startles investors. Should that happen, investors may pull back from stocks and move to the sidelines to see how low the S&P might fall.

But while my instincts tell me that this market could pull back, the above technical indicators are not warning of anything more than a mild pull back in market direction.

In this climate it remains prudent to stay the course and hold cash out from the market and ready to pounce on opportunities should they arise.